Announcement of Closure of Select Automated Facilities
CINCINNATI — The Kroger Co. (NYSE: KR) disclosed significant updates to its eCommerce strategy, aiming to create a streamlined and refined customer experience, attract new households to its brand, and enhance immediate profitability from eCommerce activities.
The retailer projects that these enhancements will yield a positive impact on eCommerce operating profits, estimated at around $400 million by 2026. This anticipated revenue is earmarked for improving customer satisfaction by implementing lower prices and upgrading store conditions, thereby augmenting operating margins.
However, the company also foresees incurring impairment and related expenses approximating $2.6 billion in the third fiscal quarter of 2025 due to these closures and the underperformance of the automated fulfillment network. Notably, these closures are expected to have a negligible impact on comparable sales excluding fuel.
Kroger’s hybrid eCommerce model is set to propel faster online growth by leveraging its robust store footprint, established third-party delivery services, and automated fulfillment centers when relevant.
“eCommerce is integral to catering to customers who seek better value, a broad selection, and adaptable shopping options,” asserted Ron Sargent, Kroger’s chairman and CEO.
“Building on our solid foundation marked by five consecutive quarters of double-digit growth in eCommerce sales and improved profitability, we are poised to take decisive steps to simplify the shopping experience, reduce delivery times, and expand our offerings, which we anticipate will translate into profitable sales growth.”
Kroger has deepened its partnership with Instacart, designating it as the primary delivery fulfillment provider for its online platforms. Recently, the two companies announced that Kroger will be among the first retailers to offer access to Instacart’s AI-powered assistant, Cart Assistant, on its iOS mobile application.
Furthermore, to broaden customer reach and fulfill additional shopping needs, Kroger enhanced its alliance with DoorDash, granting millions of consumers on-demand access to food and grocery essentials via the DoorDash Marketplace.
Additionally, Kroger is set to launch a new customer experience on the Uber Eats Marketplace in early 2026, which will allow customers to access groceries while ordering meals from their favored local eateries, alongside standard grocery delivery services.
Increased customer engagements and visits facilitated through these third-party providers are anticipated to propel growth in Kroger’s retail media business, introducing unprecedented capabilities and providing new avenues for consumer packaged goods (CPGs) to connect with targeted advertising.
“Every customer has distinct needs, and they expect diversified options to obtain fresh, affordable food without sacrificing value or convenience,” remarked Yael Cosset, executive vice president and chief digital officer of Kroger.
“Our tailored approach, which fuses our store proximity with high-capacity automation, alongside a broad selection of beloved fresh foods, empowers us to fulfill more customer needs. Delivering food and groceries to millions of families in as little as 30 minutes exemplifies a successful model for both Kroger and our clientele.”
Following a thorough review, Kroger has identified numerous opportunities to streamline its fulfillment network by closing facilities located in Pleasant Prairie, Wis.; Frederick, Md.; and Groveland, Fla., commencing in January, while maintaining oversight on the performance of remaining facilities.
In regions where there is heightened demand, Kroger intends to capitalize on automated customer fulfillment methods to enhance customer engagement, surge capacity, and bolster productivity and profitability.
As part of its expansive hybrid fulfillment network, the company will experiment with low-capital store-based automation in high-traffic areas to further refine fulfillment capabilities and elevate the in-store experience for customers.
These network adjustments, paired with an increase in store-focused fulfillment, are expected to contribute to improved returns on invested capital (ROIC).
This flexible, hybrid infrastructure marries an expanded store network, third-party delivery options, and automation to provide customers with desirable products, favorable value, and necessary options, while fostering a sustainable and profitable enterprise.
The Kroger Co. (NYSE: KR) is devoted to its purpose: To Feed the Human Spirit. With a dedicated workforce of over 400,000 associates, we serve more than 11 million customers daily through an engaging eCommerce shopping interface and a variety of retail food stores.
Through our commitment to food inspiration and uplifting communities, we strive towards achieving #ZeroHungerZeroWaste initiatives. For more information, visit our newsroom and investor relations site.
This press release contains forward-looking statements as defined by federal securities laws, encompassing projections about the Company’s customer fulfillment network simplifications and anticipated impairment charges, along with Kroger’s financial standing and future performance.
These declarations are based on management’s current beliefs and assumptions. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “project,” and variations thereof indicate such forward-looking statements. Various uncertainties could cause actual outcomes to deviate materially from these predictions.
These statements are subject to identifiable risks and uncertainties, including the potential failure to achieve the expected operating profit improvements and other factors detailed in Kroger’s filings with the Securities and Exchange Commission (SEC), particularly under “Risk Factors” in its most recent Annual Report on Form 10-K, which could lead to actual results differing significantly from projected outcomes.
Except where mandated by law, the Company disclaims any obligation to amend or revise any forward-looking statements to reflect changes in its assumptions or circumstances.
Kroger assumes no responsibility to update this information unless obligated by legal requirements. For further discussions about these risks and uncertainties, please consult Kroger’s SEC filings.
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